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Some Suppliers Are Wasting C-Level Sales Effort

February 28, 2010 Leave a comment Go to comments

Some firms selling technology solutions to large enterprises are making the mistake of focusing on C-level executives too late in the process, says Forrester Research.

Technology sales to enterprise customers these days routinely target both information technology and line of business or executive decision makers. There is clear logic, as all three typically have some role in the buying process. But “when” each of those groups is involved is different. Top business executives have most influence before a request for proposals is issued.
 
Attention therefore has to be paid to top-level executives well before any talk of specific procurements begins, the obvious issue being that influencing the type of problems to be solved, and the kind of solutions required, will occur early in the process.
 
After an RFP is issued, information technology decision makers typically are decisive, but RFP process management is delegated to staffs, so even there IT executives will wait until the evaluation phase to re-engage.
 
Throughout 2009, Forrester surveyed 166 business and IT decision-makers and found that executives are far more likely to be involved in phases that focus on outcomes rather than means.
 
Executives are most involved in the requirements definition phase. Overall, 64 percent of respondents indicated that they were involved in the requirements definition phase, with only slight variance based on company size, says Scott Santucci, Forrester Research analyst.
 
About 61 percent of survey respondents claim involvement in vendor selection, but 75 percent of IT leaders, and about half (49 percent) of business leaders say they play a role in such decisions.
 
Technology budgets are set by IT leaders, not by business executives, though.
 
Most technology vendors assume that an increasingly large portion of customer funding is coming directly from the business side of enterprise operations. That shift may be under way, but Forrester’s survey suggests that suppliers should still follow the IT money, though new funding sources requested specifically by business units are becoming more important, says Santucci.
 
Both IT and business executives delegate the RFP management process to subordinates. Very few executives indicated that they were heavily involved in the request for proposal process.
 
These results reveal an alignment problem for vendors that are increasingly encouraging their sales people to sell higher in the organization while continuing to put their focus on responding to formal proposals and requests for information. By the time an RFP is issued, the business leader participation is limited. The greatest return likely comes from contact and persuasion with business leaders in the pre-RFP phase.
 
Forrester also interviewed 40 business and technology buyers about the findings to get more background information from these executives to collect more qualitative feedback from the survey results.
 
Business leaders and IT executives have different perceptions about requirements. Business executives say IT executives “don’t understand our business.” They don’t understand the daily challenges of the employees whose productivity organizations would like to improve.
 
Most vendors are viewed as suppliers to be managed, not partners to be embraced. A common trend emerging is for companies to aggressively reduce the number of technology suppliers they work with.
 
Decision-making is becoming increasingly more collaborative, though. While finance processes lend themselves well to technical automation, not a lot of line of business executives may have as much confidence.
 
With functions that blend processes, information, and customer interaction like sales, service, or repair, so much of the focus is on person-to-person interactions, that there is no way he or his IT staff could understand the entire nuance associated with their functional areas, one respondent indicated.
 
Budget-setting and funding models are more complex than most vendors typically believe.
 
Most executives we spoke with felt that technology vendors had little idea how involved their budgeting and funding processes were. Even where executives have complete control over their budget, they often solicit buy-in from their extended team on technology investments, because they’ve been burned by failed initiatives in the past.
 
Most large technology companies spend 70 percent or more of their overall IT budget on maintenance, ongoing operations, systems and equipment, adding further difficulty to the decision-making process.
 
Executives rarely get into the details of vendor evaluation. Almost unanimously, executives told us that they have very limited roles in the RFP process. Generally, they will provide a set of governing principles, high-level business outcomes, a time line, and maybe some budgetary parameters, but that’s about it, says Santucci.
 
Either way, the more senior executives are going to be involved either earlier or later in the process. If the objective is increased access to executives, the time to be active is before an RFP is issued. By the time an initiative has been funded, that customer already has an idea of their requirements (either right or wrong), and their vision might not match up well with your capabilities.
 
Executives are most involved earlier in the process. Executives are more likely to be involved before an RFP and in the final selection process. Trust is developed over time, not at the moment when solution architects or sales engineers respond well to questions, says Santucci.
 
The level of executive involvement is based on the altitude level of the problem. The degree of executive involvement, the availability of potential resources, and the ability to work around internal IT or procurement policies is directly proportional to the level of business problem a supplying firm can help address.
 
Tactical issues, like expanding network bandwidth or consolidating the number of data centers, will always take a back seat to the strategic goal of the business. For example, Home Depot is rolling out an enterprise resource planning system even though same store sales have been down 6.9 percent and 8.5 percent, respectively, over the past two quarters.
 
Home Depot is trying to improve the company’s competitive posture, rolling out a multi-year strategy to develop regional distribution centers to allow local stores to have more of an appropriate seasonal mix of inventory, while also allowing economies of scale in distributions.
 
The classical, asset-based financing model in practice in most companies is going to change, says Santucci. Over the past several decades, the variety of hardware, support personnel, physical space, and software licenses required to maintain past initiatives have typically been accounted for by finance as assets, which it groups into IT budgets to help control those costs.
 
However, as the costs of business applications continues to go down and the technical acumen of business leaders goes up, the demand from various business groups on IT is increasing. Finance may want primarily to drive cost out of the business. Line of business executives likely are more interested in the do-more-with-less objective or efforts to leverage technology to improve productivity.
 
“Saves money” is important to financial executives. “Does more for less” and “enhances productivity” is going to be more important to business executives.
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